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Madoff Fraud Claims: Investor Checklist

January 12th, 2009 by Madelaine Eppenstein

Suzanne Barlyn, Dow Jones Newswire, Interviews Ted Eppenstein (January 8, 2009):

“Theodore G. Eppenstein, a New York securities arbitration attorney, says he’s been consulting with investors who have incurred losses through Madoff. His firm will examine hedge funds and advisors ‘that fed client money blindly into Madoff without doing adequate due diligence,’ he says.

But there may be other potential avenues of recovery. Eppenstein says he’s investigating allegations that Madoff may have compensated individuals to infiltrate exclusive country clubs and plug the firm’s investment performance to other members. ‘This investment group was made to be an exclusive club. It was a privilege to be accepted into the group so you could blindly throw your millions and get this so-called return,’says Eppenstein.

Other possible targets could be consultants that may have analyzed the financial soundness of Madoff’s investment advisory firm and his strategies, in order to determine whether hedge funds should invest, he says. Madoff’s relatives, including his brother Peter and sons Andy and Mark, who worked for Bernard L. Madoff Investment Securities LLC, could also be successfully pursued if they were, in fact, knowledgeable about the alleged Ponzi scheme, says Eppenstein. Professional and personal liability insurance covering individuals who worked at hedge funds, investment advisors and consulting firms may also provide a recovery source, he says.”

* * *

Many investors who were victims of this alleged Ponzi scheme are still sitting on the sidelines while others are pursuing recovery from alternative sources. If you believe your investments were in any way connected with the Madoff organization, here is a checklist of just some of the potential actions which may be relevant according to your individual circumstances:

• potential claims against investment advisors, investment funds, fund managers and hedge funds, among others, including so-called “feeder funds,” that did not properly perform their due diligence before investing customer funds with Madoff. Such claims might be covered under professional liability insurance policies;

• potential claims against “bird dogs,” individual finders-for-pay and promoters who trolled the country clubs and yacht clubs to recruit other investors on behalf of Madoff or recommended Madoff to their friends and acquaintances for their own personal gain without making proper disclosure;

• Potential claims under homeowners, umbrella and other insurance policies;

• potential claims against forensic auditors and firms who were hired to investigate Madoff and did not find the red flags;
• potential claims against the “fraudulent conveyance” group of investors who cashed out and received profits from their investments with Madoff or redeemed their principal;

• potential claims under SIPC. The Trustee overseeing the liquidation of the Madoff organization has mailed out over 8,000 claim forms to investors. The president of SIPC, Stephen Harbeck, has reportedly stated in an interview that even investors who are not technically eligible for SIPC relief because they were not investors with the Madoff brokerage firm, should file a claim anyway. Such an investor, Daniel Goldenson, wrote to the federal court judge presiding in the Madoff cases in federal court in New York and suggested that the court consider broadening the class of eligibility investors. Mr. Harbeck was quoted by Diana Henriques in The New York Times online edition on December 29, 2008 as stating in an interview “that he could not predict whether the judge would follow Goldenson’s suggestion. The crucial step now, he said, was for affected investors to submit their claims, so that they were on the record as the legal issues were being worked out.” There are strict deadlines that are coming up for these filings, which we wrote about in our last post on the Hotline: If investors haven’t received the mailing, they will need to use the claims forms created specifically for the purposes of the Madoff liquidation proceeding, available online for downloading on SIPC’s Web site at and on the Trustee’s Web site at

• potential claims for some pension beneficiaries against the trustees who managed personal investment accounts of the beneficiaries and invested with Madoff; and

• potential tax strategies.

Madoff investors require the assistance of legal, tax and other professionals who have had experience in recovering losses from Ponzi schemes. Our firm won a record recovery in 2002 of over $46 million for 13 investors in a massive commodities fraudulent allocation scheme with Ponzi features. Contact Ted Eppenstein at 212-679-6000 or to discuss your situation.

Posted in Securities Arbitration & Litigation

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